October 10, 2013
STERLING — Area school board members learned about the Amendment 66 and Senate Bill 213 questions that will appear on the 2013 election ballot Wednesday, during a Colorado Association of School Boards (CASB) regional meeting, held at the Ramada Inn.
Ken DeLay, executive director of CASB, and Kathleen Sullivan, chief counsel, gave a presentation on the two questions.
“Amendment 66 is a proposal to amend the Colorado constitution and a couple of statues to raise some additional tax revenue. Senate Bill 213 is a proposed new school finance bill, that was passed in this last legislative session, which will not go into effect unless Amendment 66 passes,” DeLay explained.
If Senate Bill 213 does go into effect, it will be like other school finance acts and require authorization from the legislature every year.
Amendment 66 proposes to amend the Colorado Constitution, as well as the statutes that pertain to income tax, to create a two-tier income tax rate. Sullivan noted the new tax rates would only be for personal income tax; they wouldn't impact business income tax.
Right now, Colorado has a flat personal income tax rate of 4.63 percent. Amendment 66 would raise that rate to 5 percent on the first $75,000 of taxable income and to 5.9 percent on any taxable income over $75,000.
So, if you're in a household that has a gross income of $55,000, that means you've got a taxable income of approximately $26,000, which means the total impact of that tax increase would be $97 for the household.
Amendment 66 also amends Amendment 23. Passed in 2000, Amendment 23 was an effort to ensure that K-12 education was funded at a stable rate every year. Amendment 66 would repeal the part of the Amendment 23 that requires the legislature to every year fund K-12 education at the same level it did the previous year, plus inflation.
Under Amendment 66, at least 43 percent of state income and sales tax must go into the state education fund.
“What happens is in good years, when the state brings in a lot of revenue, that 43 percent is going to be a lot more than last year's spending plus inflation. In bad years, it's going to be less,” DeLay said. “The idea of this provision is that the legislature will put aside and keep in the state education fund, a little bit of money in reserve, a savings account, a reserve account, a rainy day fund if you will, only for education, so that when we have a down economy, rather than cutting school finance, they can take money out of the state education fund.”
Additionally, if Amendment 66 passes, the revenue that comes in because of the tax increases would be put into a newly created state education achievement fund.
“In essence then, the result of this amendment would be to create two separate savings accounts within the state budget, from which the legislature would take revenues to fund K-12 education,” DeLay said.
He pointed out that “most rural school districts, I would say, upwards of 90 percent of them, will get more revenues back under this funding formula than local citizens will pay in taxes.”
No matter what, for 2013-14 the current School Finance Act reauthorized by legislature last spring will remain in effect. If Amendment 66 passes, initial dollars collected under the new tax rates would by allocated by the legislature.
In 2014-15, Amendment 66 would put some new data and transparency requirements in effect and of any new tax revenue collected at that point, 40 percent would go to K-12 general expenses, 40 percent to the Building Excellent Schools Today program, 15 percent to support educator effectiveness initiatives and 5 percent to technology.
On July 1, 2015, Senate Bill 213 could be implemented.
Following their presentation, DeLay and Sullivan acted as senators and debated the pros and cons of Amendment 66 and Senate Bill 213.
Among the arguments against Amendment 66 is that it's not needed to implement Senate Bill 213, because Colorado already has enough money to do that, with $1.6 billion in the education fund.
Sullivan said using that $1.6 billion to implement Senate Bill 213 is a violation of “one of the fundamental rules of fiscal responsibility, which is we are using one time money to try and fund ongoing costs.”
She also pointed out that like last year there is a negative factor of almost $1 billion that is being pulled out of the current school finance formula.
“It's not sustainable,” Sullivan said. “Without Amendment 66, we are going to be bumping up against the TABOR limit, we are going to be unable to restore the cuts that have been made to K-12 education and we are going to further down the path of fiscal decline.”
Another argument is that this tax increase will harm businesses and economic growth in Colorado.
DeLay said this tax increase would target “our small business owners, who are reporting their income as individuals. They're already paying on their business property a rate three times higher than residential people.”
“We will be targeting both the taxpayers and the income this state needs for economic growth and development,” he said.
Sullivan pointed out that “Colorado is not currently seen as a particularly business friendly tax state, as it is” and Amendment 66 “doesn't pretend to fix the Gallagher Amendment problem in the Colorado constitution, which is where (tax) discrepancy exists.”
She also noted that Colorado is a low tax state.
“When you look at the tax burden per $1,000 of income, Colorado is now about 44th in combined state and local taxes. Even if this amendment passes, Colorado will only move to 40th,” Sullivan said.
As far as economic growth, she pointed out that when the state had an 8 percent tax rate, Colorado experienced periods of both fast and slow economic growth.
“What's going to keep businesses out of Colorado is the lack of a sustainable education system,” Sullivan said.
The final argument is that there is no accountability in how the funds from Amendment 66 will be spent.
“School districts will continue to receive money from the state and local taxpayers based only on the number of students enrolled. There will be no financial consequences to a school or a school district if students do not meet state standards. The same amount of money will flow to the school district, regardless of student outcomes,” DeLay said.
“Moreover, with the exception of a very small amount of money there is no requirement that a school district either direct the money where it is most needed, or insure that a school that is misspending money pays some kind of consequence.”
Sullivan pointed out school boards are constitutionally authorized to control instruction in their respective districts.
She also noted that while student count will still be important, it will no longer be based on who's in seats in the classroom on Oct. 1. Instead, the county will be based on where the student spends their entire school year.
“We will have true accountability, because if a child leaves a program, to go to another educator, that money will follow them, that child will be counted throughout the school year,” Sullivan said. “Further, for the first time we are going to see the legislature doing a true cost study, a true analysis of what it actually costs to implement the reforms that they are passing.”
Additionally, Senate Bill 213 will require the state to do an investment on return within five years.
Following the debate, DeLay reminded the school board members that “school finance is a state responsibility, education is really a statewide public good (and) it's a benefit to all of our citizens.”